Excavate a trench for the wall. The trench should be deep enough to accommodate a base of 4 to 6 inches of compacted gravel and to bury at least two full courses of block.
Add the course gravel to the trench. Add 1 to 2 inches, level and tamp. Do this in successive "lifts" until the desired depth has been attained.
Lay the first course of wall to the desired length. If you're using mortar mix, this will need to be mixed prior and the first course will be set into a bed of mortar. Make certain to stay level with each brick. The smallest deviation in levelness on the bottom courses will be seen throughout the height of the wall.
Start laying the second course atop the first. Evenly spread a layer of the mortar on top of the first layer with a trowel (if dry stacking, set the second layer a fraction of an inch back toward the slope). Do this brick by brick as opposed to spreading a full layer of mortar as it will likely dry before you have set all of the bricks. Add mortar to fill the vertical seams as you go as well. Stagger the ends of the bricks so that they do not line up with the brick below it, as seen in the typical running bond pattern.
Lay the drain pipe directly behind the wall. Make sure that both ends extend beyond the length of the wall.
Back-fill round gravel over top of the drain pipe. It can be as high as the top of the wall thus far.
Continue adding courses to the wall as before. Make sure to trowel a thin layer of mortar on top of the block prior to setting the new one down and make sure to maintain your level throughout. If not using mortar, continue each successive layer with a slight setback toward the slope.
Continue adding back-fill gravel as you continue up each course of wall. As you get toward the desired height, the excavated soil from the trench may be used instead so that you can plant or sow seed behind the wall.
Follow the same steps for each successive wall if doing an array of smaller terraced walls.